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By Annabelle Dickson, Business writer
Thursday, September 6, 2012
Industry experts last night said the potential merger of Robinsons maker Britvic and Scottish Irn Bru owner AG Barr was unlikely to have an impact on its Norwich manufacturing operation.
The two companies yesterday confirmed they were in the early stages of discussions to strike a deal which could create one of Europe’s largest soft drinks companies.
The approach by AG Barr comes just weeks after Britvic admitted it faces a £25m bill following a safety scare and product recall in July after problems were discovered with the design of the lids of its leading Fruit Shoot and Fruit Shoot Hydro brands, which are produced at its Carrow Works factory in Norwich, and in Chelmsford.
In a statement yesterday the companies said the merger represented an opportunity for both companies to enhance their industry position, and achieve significant “synergies”, though it was not clear what this would mean for the 260 staff working in Norwich.
City analyst Charles Pick from Numis said what those synergies were was a key issue that was yet to be identified.
“Clearly there will be two headquarters and only one would be needed,” he said. “I wouldn’t have thought there would be factory closures necessarily because AG Barr is a bit cotrained by its factory capacity.”
At the end of June it announced it was investing more than £41m in extra capacity in Milton Keynes. I do not think Britvic has got surplus factories. They were closed some years ago.”
“The big synergies would come more from being able to sell AG Barr in England and Wales using Britvic sales teams, and vice-versa. At this time though, nobody knows what would be involved in terms of hard numbers.”
The merger news is the latest in a flurry of activity in the food and drink sector locally.
Hain Celestial announced last month it was planning to expand its production facilities in Fakenham and the US-owned company also acquired some of the top packaged grocery brands of food group Premier Foods Plc.
Craig Hodgson, Norwich partner and head of food and beverage at law firm Mills & Reeve, said: “There is clearly a huge amount of consolidation in the market and that is expected to escalate.
“There are few opportunities in the beverage sector for acquisitions and AG Barr was the obvious large independent.”
He said that while AG Barr had been staunchly independent and was hugely proud of it Scottish roots, he suspected there had been some shareholder pressure in both AG Barr and Britvic to see an acquisition or merger which would see cost savings and make the combined entity more profitable.
“As separate independent companies it is difficult to achieve these cost savings,” he added.
He also hoped that Norwich would not be affected in any rationalisation of production facilities as it was a very large facility.
In a joint statement, the companies said that under the terms of a possible deal, Britvic shareholders would own 63pc and AG Barr shareholders 37pc of the enlarged group’s share capital.
If the merger went ahead, the board of directors would be drawn equally from the boards of both companies.
In addition, the new board would comprise six other non-executive directors, three nominated from each of Britvic and AG Barr.
With a reputation as one of the toughest people in business, many stores would shudder at the thought of getting the Mary Portas treatment.